In which of the following situations is a budget surplus most likely to occur?
A)When fiscal policy is expansionary
B)When the economy is contracting
C)When fiscal policy is expansionary and the economy is contracting
D)When fiscal policy is contractionary and the economy is expanding

Question

Quizplus · Accepted Answer

A budget surplus is most likely to occur when the government's fiscal policy is contractionary (meaning it is aimed at reducing spending or increasing taxes) and the economy is expanding. In this scenario, tax revenues tend to increase due to higher income and business profits, while government spending is restrained, leading to a surplus.

In Which of the Following Situations Is a Budget Surplus